Bombay High Court
M/S Arth Housing Development Pvt.Ltd vs Rattan Lalchand Mukhi And 2 Ors on 8 May, 2024
Author: Bharati Dangre
Bench: Bharati Dangre
2024:BHC-OS:8292
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E-file
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INTERIM APPLICATION (L) NO.36585 OF 2022
IN
EXECUTION (L) NO.34349 OF 2022
Rattan Lalchand Mukhi & Anr. .. Applicants
Versus
Arth Housing Development Pvt. Ltd. .. Respondents
& Anr.
WITH
INTERIM APPLICATION (L) NO.494 OF 2023
IN
SUIT NO.451 OF 2016
M/s Arth Housing Development Pvt. .. Applicants
Ltd.
Versus
Rattan Lalchand Mukhi & Ors. .. Respondents
...
Mr.Sharan Jagtiani, Senior Advocate with Mr.Mutahhar Khan,
Mr.Aniesh Jadhav, Mr.Dev S. Tejnani i/b Mr.Manoj K. Bhatia
for the Applicants/Plaintiffs in IA(L)/36585/22 and EXA(L)/
34349/22.
Mr.Simil Purohit with Mr.Shanay Shah, Mr.Kalpesh Mehta,
Mr.Vasim Shaikh, Ms.Mansi Shah i/by Pravin Mehta & Mithi &
Co. for the Respondent No.1 in IA(L)/36585/22 and EXA(L)/
34349/22 and for the Applicant in IA(L)/494/23 and in
S/451/16.
Mr.Dushyant Purekar with Mr.Rajat Dedhia for the
Respondent No.2 in IA(L)/36585/22 and EXA(L)/34349/22
and for the Applicant in IA(L)/494/23 and in S/451/16.
...
M.M.Salgaonkar
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CORAM: BHARATI DANGRE, J.
DATED : 08th MAY, 2024 P.C:-
1. For execution of the Decree passed in Suit No.451 of 2016, in the wake of the Consent Terms dated 04/05/2016, Mr.Rattan Lalchand Mukhi and Ms.Bhavisha Rattan Mukhi, the two Applicants, have filed Application for execution under Order XXI Rule 11(2) of the Code of Civil Procedure, against Arth Housing Development Pvt. Ltd., the Developer, the Respondent No.1 herein and White Rose Co-Operative Housing Society Ltd., the Respondent No.2.
In column (G), they seek execution against Defendant No.1-Arth Housing Development Pvt. Ltd., in the following manner :-
(a) To hand over possession of Flat Nos.1402 and 1502, admeasuring 1800 sq.ft. Carpet area each, in the building known as 'White Rose', on ownership basis alongwith 3 car parking spaces to each of the Applicants/Plaintiffs.
(b) Liquidated Damages as per Clause 7.2 of the Escrow Agreement dated 29/05/2013; Rs.25,000/- per day for each Applicant .
(c) Rental compensation of Rs.30,90,312.5 to each Applicant.
(d) Possession of an area admeasuring 375 sq.ft.
carpet to each of the Applicants.
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(e) Total Decreetal Amount of Rs.43,08,010.26
(f) Simple interest at the rate of 12% p.a. on
Rs.7,48,567.26 from April 2020 till September 2022.
(g) Further interest at the rate of 12% p.a. on Rs.43,08,010.26 from April 2020 till payment and/or realization.
(h) Liquidated Damages in the sum of Rs.3,00,00,000/- to each Applicant.
2. It is in this Execution Application, the Applicants (Plaintiffs) have taken out Interim Application (L) No.36585 of 2022, for the following reliefs:-
"(a) This Hon'ble Court therefore be pleased to pass an Order and direct the Respondent No1 to file an Affidavit before this Hon'ble Court and disclose on oath the details and particulars of all their assets and properties as this Hon'ble Court deems fit;
(b) This Hon'ble Court be pleased to pass an Order and appoint the Court Receiver, Bombay High Court to take physical possession of the said Flats and 06 car parking spaces with directions to the Court Receiver to appoint, at the cost of the Respondent No.1, any suitable person/s to complete the balance works in respect of the said Flats in accordance with the Development Agreement dated 11th July 2013 and the Escrow Agreement dated 29th May 2013, and, thereafter, hand over possession of the said Flats and car parking spaces to the respective Applicants;
(c) Pending the hearing and disposal of the present Interim Application, this Hon'ble Court be pleased to pass an Order and direct the Respondent No.1 to deposit the amount of Rs.50,56,577.52 (including interest computed as on date) in the Registry of this Hon'ble Court or furnish a bank guarantee or liquid security of similar nature as this Hon'ble Court deems fit;
(d) In the alternate to prayer (b) above, pending the hearing and disposal of the present Interim Application and till such time as the Respondent No.1 deposits the awarded amount of Rs.50,56,577.52 (including interest computed as on date) in the Registry of this Hon'ble Court or furnishes a bank guarantee or liquid security of similar nature, this Hon'ble Court be pleased to M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 4/45 10 IAL-36585-22.odt pass an order and restrain the Respondent No.1, its employees, agents, servants, assignees and/or any other persons claiming through it from transferring, selling, disposing or in any manner, alienating and/or dealing with all its assets and properties;
(e) Pending the hearing and disposal of the present Interim Application, this Hon'ble Court be pleased to pass an Order and restrain the Respondent No.1, its employees, agents, servants, any other persons claiming through it from selling, transferring, alienating, parting with possession, encumbering or, in any manner, dealing with the said Flats being 1402 and 1502 and 06 parking spaces."
3. The aforesaid reliefs are sought in the background facts, which are gleaned from the plaint alongwith Execution Application, seeking the execution of the Decree passed on 04/05/2016 in the Suit instituted by the Plaintiffs.
Applicants Nos.1 and 2 are husband and wife and are the owners of Flat No.10 and Flat No.9 respectively, each admeasuring 725 sq.ft. carpet area in the building 'White Rose' situated at 4th Perry Road, Bandra (W), Mumbai.
A Development Agreement (DA) was executed between Respondent No.1, the Developer and 'White Rose Co-Operative Housing Society Limited', the Respondent No.2, containing several stipulations, recording the understanding arrived, as regards redevelopment of building 'White Rose', which comprised of four floors (ground + 3 floors) with 15 residential flats and open parking space. In the wake of the dilapidated condition of the building and, since, the members of the Society had expressed their inability to contribute to the expenses for its repair, in the Special General Body Meeting of the society, held in presence of the Deputy Registrar of the Co- Operative Societies, the Developer was chosen for redevelopment of the property.
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The redevelopment originally commenced in 2001 and pursuant thereto, a Development Agreement was executed on 03/04/2002, however, no actual work was carried out. Thereafter, the Society accepted the revised offer from the Developer and a new Development Agreement was executed on 11/03/2013.
Since the Society had different area flats ranging from 700 sq.ft. to 720 sq.ft., in order to attain uniformity in the area of the new constructed flats, all the members agreed to a standard size of 958.5 sq.ft. carpet area and those flat owners who had bigger area than 710 sq.ft., were to be compensated by the Developer in the area value, from those members owning smaller area flats. The declaration of the Developer as well as its right under the Development Agreement were specifically set out in different clauses.
4. The Development Agreement conferred the rights of development upon the Developer, subject to such terms and conditions set out therein, provided that the Developer shall ensure that all the terms and conditions agreed upon between the parties in respect of a Developer's saleable area are incorporated in the Agreement for Sale, to be executed with intending flat purchasers, as per MOFA.
The Developer agreed and declared in Clause 5.9 as under :-
"5.9 The Developers declare, agree, undertake & covenant with the society that in future, if Government, MCGM or any other government department introduces any such scheme or rule, like increasing the FSI from present DC rule or provide benefits or any other amendments which can generate further benefits to society, M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 6/45 10 IAL-36585-22.odt the entire benefits will be shared equally between the developers and the existing members in the ratio of 50-50. the said benefits shall be given to the members in carpet area before the IOD and if the above area is been sanctioned by the authority after IOD, the benefit will be calculated by the society and the Developer by mutual agreement and as approved by Special General Body meeting then held."
Clause 6.2 of the Development Agreement, further contemplated as under :-
"6.2 The Developers shall acquire any further TDR/FSI at their own cost and shall carry out the construction at their own cost in accordance with specifications and the sanctioned Building Plans. The Developers agree to use the said F.S.I. and/or T.D.R. as per the Rules, Regulations, Circulars and Notifications issued by the Competent Authorities of the State, M.C.G.M. and other statutory bodies."
5. In addition to the above, the Developer's consideration to the Society and it's members, included an obligation to make payment of displacement compensation calculated at the rate of Rs.105/- per month per sq.ft. of the existing carpet area, in possession of each member of the Society, as compensation for obtaining temporary alternate accommodation from the date of individual handing over vacant and peaceful possession of the flat to the Developer, being referred to as displacement compensation. Clause 15 provided that the displacement compensation shall be paid to the existing member for a period of 24 months, in the manner set out in Clauses 15.1 to 15.3.
In addition, the Developer agreed to pay to each member an amount equivalent to two months rent as brokerage expense on before the execution of member's individual agreement. Further, the Developer undertook to pay each member a corpus amount for hardship and inconvenience endured during redevelopment period at the rate of Rs.4,000/-
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per sq.ft. of the carpet area, held by each member in the existing flats as Hardship compensation (Corpus), which was agreed to be paid at the time of execution of the individual agreement, which was to be executed within a period of 30 days from the receipt of IOD.
Clause 18 of the Development Agreement further provided as under :-
"18. In case the Developer is unable to grant possession of the premises with OC to all the members within 30 months from the execution of this agreement then the developers shall be liable to pay Rs.50,000/- (Rupees Fifty Thousand only) to each member besides the displacement compensation detailed above and an additional amount towards both shifting and brokerage expenses incurred by the members. This compensation is in addition to any penalty clause mentioned herein below."
6. The time schedule for commencement and the completion of development was specifically set out in Clause 27 to the following effect :-
"27. Time Schedule for commencement and completion of the development 27.1 The Developers shall apply and obtain IOD provided within six months from the date of execution hereof. The Developers shall also purchase the outside TDR/FSI to be consumed on the said property and amalgamate the same with the said property within the period as stated above. 27.2 The Developers shall commence and complete the entire project within 30 months from the date on which the Society puts the Developers in vacant and peaceful physical possession of the site after all its members having vacated their respective Flat Premises."
Further Clause 30 provided that in the event of the project not being completed within a period of 30 months as provided, the Developer shall pay to the Society an amount of Rs.2,00,000/- per month for each month delay as liquidated damages.
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However, the liability to pay such damages was to arise only after expiry of grace period of six months.
It was expressly clarified that the amount of monthly liquidated damages of Rs.2,00,000/-, is in addition to the compensation for temporary alternate accommodation.
7. Apart from the Development Agreement to the above effect, two separate Escrow Agreements were executed between the Applicants and the Developer on 29/05/2013, since the Society by its Resolution dated 12/05/2005 permitted the Applicant No.1-Rattan Mukhi to negotiate independently with the Developer in respect of the area of new flats, to be allotted in the new building, car parking spaces as well as other entitlements, in lieu of their consent to join in redevelopment of the existing building and agreeing to vacate the flats occupied by them. Upon lengthy negotiations, understanding was arrived and it was recorded in form of an Escrow Agreement and this Agreement, in particular comprised of the following clauses:-
"Clause 3 : The Developer to provide 3 car parking spaces free of cost, 2 of which shall be located in the basement + podium and one one stilts Clause 3.2 : The Developer shall be bound by terms of Development Agreement save and except those modified by escrow agreement with Applicants.
Clause 4 : The Developer to execute PAAA simultaneously with the Applicants vacating and handing over peaceful possession of their flats. Clause 6.1. : The Developer to provide flat of 1800 sq.ft. carpet area on 15th habitable floor for lumpsum Rs.75,50,000/-, which includes cost of construction, BMC premium, etc. M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 9/45 10 IAL-36585-22.odt Clause 6.1(1) : A sum of Rs.75,50,000/- inclusive of the construction cost and BMC premium shall be paid by the member in the tranches set out, with sum of Rs.2,50,000/-, to be paid simultaneously at the time of execution and last tranche of balance 10% to be paid upon the Developer obtaining Occupation Certificate.
Clauses 7.2 and 7.3:If the Developer failed to complete construction in 30 months, it is required to pay liquidated damages of Rs.25,000/- per day to the Applicants. Clause 11 : The Developer to provide rent computed at Rs.125 per sq.ft. of carpet area i.e. Rs.90.625/- per month with escalation of 10% after 24 months. Rent to be paid by PDCs handed over in advance for 24 months and, thereafter, in advance for every 6 months.
Clause 11.4 : The Developer is required to pay brokerage charges of Rs.1,81,250/- and relocation charges of Rs.40,000/-.
8. Existence of the disputes between the Applicants and Arth Housing Development Pvt. Ltd., the Respondent No.1 resulted in institution of Suit No.451 of 2016 by the Applicants, which came to be disposed off on 04/05/2016, in the wake of the Consent Terms executed between the Applicants and the Respondent Nos.1 and 2.
In the Consent Terms, the Applicants agreed to vacate their respective flats within 30 days of receipt of intimation in writing about payment of premium for fungible FSI, being paid to BMC and it was agreed that they shall be given possession of two flats of 1147 sq.ft. carpet area on 15 th floor and one flat of 1311 sq.ft. carpet area on 14th floor; totally admeasuring 3600 sq.ft. in terms of the Escrow Agreement. The Applicants as well as the Respondents agreed to abide with the terms of the Development Agreement and the Escrow Agreement.
The Consent Terms were accompanied with the plan indicating the flats to be handed over to the Applicants.
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In furtherance of the Consent Terms, on 08/10/2016, the Applicants handed over the vacant possession of Flat Nos.9 and 10, to the Developer-Arth Housing, but it is their grievance that the draft of PAAA was not received by them until August 2019 and this turned out to be the bone of contention between them at a later point of time.
9. On 08/11/2017, the Developer filed a Notice of Motion, seeking permission of the Court to provide flats to the Applicants on 11th and 12th floors instead of 14th and 15th floors, as agreed in the Consent Terms in the wake of the height restriction of the buildings in proximity of Mumbai Airport.
10. On 11/11/2017, the Society terminated the Development Agreement, as the Developer failed to take steps towards its redevelopment, despite its members handing over the vacant possession of their respective flats.
Upon this step of the Society, the Escrow Agreement executed with the Applicants, which ran parallel to the Development Agreement, also stood aborted consequentially The Developer-Arth Housing, filed the Arbitration Petition under Section 9 against the Society and the Court appointed an Arbitrator, to adjudicate the existing disputes, which resulted into a compromise, which was presented before the Arbitrator and on 23/08/2018, in form of Consent Terms, which resulted in withdrawal of the termination notice by the Society, subject to the Developer undertaking to obtain IOD within 90 days and on executing PAAA with all the members within 15 days.
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11. One significant change occurred at this stage on account of change in DCR, and the availability of additional FSI and it was agreed that if the Developer was able to utilize the same, it shall pay Rs.35,00,000/- to each member of the Society. Obviously, the Applicants being the members of the Society, this benefit was also to accrue them.
12. It is the grievance of the Applicants that though the Developer handed over postdated cheques for 24 months, to all the members, it failed to discharge its obligations towards the Applicants, which constrained them to file Contempt Petition. In the interregnum, progress of the project was further hampered, as the Developer was unable to obtain sanction for its plans from MCGM and the Society agreed to proceed with the construction on ZERO FSI IOD, provided the Developer, shall commence payment of monthly rent to its members, subject to adjustment of rent paid at the time of execution of the PAAA. The Applicants were, however, without any justiciable cause, deprived of all these benefits, flowing from Development Agreement and Escrow Agreement.
13. In the year 2019, the Developer informed that it had entered into partnership with M/s I.R.Developers and it is the new Developer, who passed on the cheques to other members the Society, as the Society consented for assignment of redevelopment in favour of M/s I.R.Developers, though the Applicants never consented for the same.
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It is only on 12/04/2019, Arth Housing Development Pvt. Ltd.,the Developer, addressed as letter to the Applicants on without prejudice basis and forwarded six cheques for Rs.99,687/-, towards rent for October 2018 to March 2019, but they were returned to Respondent No.1, since the payment, did not conform to the terms of the Agreement in form of Development Agreement and Escrow Agreement.
Once again, Consent Terms came to be executed in the dispute between the Developer and the Society and this time, even M/s I.R. Developers was a signatory to the same, as a sister concern of Arth Housing. PAAAs were agreed to be executed and the proforma was annexed with the Consent Terms. The Consent terms were also accompanied with the statement of corpus and the rent payable to its members as well as the allotment of flats, though it did not include the flats of the Applicants.
Ultimately on 14/05/2019, the Consent Award was passed by the Arbitrator with the participation of M/s I.R.Developers.
14. As per the Applicants, it is only after three years of vacating their flats, a draft PAAA for allotment of flats on 11 th and 12th floor was forwarded to them, with Arth Housing being the confirming party and M/s I.R.Developers, being shown as the Developer and as per the Applicants, this contradicted the PAAAs forwarded to other members of the Society.
Dispute arose between the Applicants and M/s I.R.Developers, as it claimed certain payments under the Escrow Agreement and also insisted upon the execution of PAAA and the entire correspondence exchanged is placed on M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 13/45 10 IAL-36585-22.odt record, as part of the Application. M/s I.R.Developers demanded payments under Escrow Agreements and it insisted on execution of PAAA.
15. The Applicants filed Interim Application (L) No.1488 of 2021, seeking allotment of flats on 14th and 15th floors of the building, as per the original Agreement, which relief was opposed by the Developer on the ground that their flats were already sold to the third parties. The Applicants, therefore, were constrained to file another Interim Application No.2271 of 2021, seeking cancellation of the agreements executed with the third parties in respect of the flats on 14th and 15th floors.
Both the Interim Applications were ultimately disposed off on 30/08/2022, having been withdrawn, with liberty to institute the proceedings to execute the Consent terms dated 04/05/2016.
In the interregnum, the Developer completed the construction and obtained the occupation certificate from MCGM for the new re-developed building on 16/06/2022 and though on 17/06/2022, a letter was addressed by the Developer to the members of the Respondent No.2-Society, offering possession, but it is the case of the Applicants that they were never offered the possession of their flats, in the new building.
It is in the background of the aforesaid facts and events, the present Execution Application came to be filed alongwith Interim application, which is referred to as above.
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16. The Applicants are aggrieved by the non-payment of the rent, as well the other components of the Development Agreement, and it is their case that even the flats allotted to them, are not made ready for occupation, despite Occupation Certificate for the building having been obtained by the Developer. This conduct of the Developer is flagged by the Applicants, as failure to adhere to the Consent Terms filed in the Suit, whereby the Developer had agreed to abide by the terms of the Development Agreement and the Escrow Agreement.
17. The learned senior counsel Mr.Jagtiani in support of the reliefs in the Interim Application, by inviting my attention to the chronology of the events, has assertively submitted that the Escrow Agreement is a separate arrangement, exclusively between the Applicants and the Developer and the rights accruing the Applicants therefrom are not through the Society, but they are independent of the rights of the Society in the Development Agreement.
According to him, despite the Society's building being vacated in 2016, the Developer did not commence the construction and this led to the termination of the Development Agreement. It is only when the termination is recalled on 23/08/2018, in form of the Consent Terms, the redevelopment process got a push. In light of Clause 5.9 of the Development Agreement, which had agreed that the Developer shall provide additional benefits if they are made available and these benefits shall be passed over to the members of the Society and as a result of this understanding, when additional M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 15/45 10 IAL-36585-22.odt area became available due to change in the DCR post 2018, each member, including the Applicants, were entitled for an area of 325 sq.ft. and this was agreed to be monetized in the sum of Rs.35,00,000/- payable to each member and the manner in which it shall be paid was also provided in the Consent Terms, which resolved the dispute between the Developer and the Society.
Annexure F of this Consent Terms set out the stages at which part of the amount shall become payable.
Parallel to the said agreement is the Escrow Agreement and Mr.Jagtiani, by relying upon Clause 6.1(1) would submit that lieu of the Applicants vacating the respective premises and making it available to the Developer for progressing with the redevelopment work, the Developer had agreed to provide to each of them total 1800 sq.ft. area inclusive of fungible FSI area in form of constructed self contained flat, which would comprise of 725 sq.ft. carpet area plus 725 sq.ft. of TDR area and 350 sq.ft. of fungible FSI area. In the Escrow Agreement, it was agreed that the area of 1800 sq.ft. (carpet) shall be provided to each of the Applicants on 14 th and 15th floor for lumpsum of Rs.75,50,000/-, which was agreed to be paid in the tranches set out in the Escrow. Mr.Jagtiani thus would submit that the entitlement of the Applicants for the rehab component and the saleable component, which they had agreed to purchase came to be intrinsically woven together in the Escrow and what was agreed to be provided was a composition of both, the rehab and the saleable component.
He would submit that the case of the Applicants stand on a different footing than the other unit holders, as what they M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 16/45 10 IAL-36585-22.odt executed, was an Escrow Agreement, in addition to the Development Agreement.
According to Mr.Jagtiani, the Applicants vacated their respective flats in the year 2016 and expected the PAAA to be signed immediately, but a draft of it was received by them in the year 2019 and the Respondent-Developer, all the while oscillating between the Development Agreement and the Escrow Agreement, failed to abide by either of it.
The Escrow Agreement, according to Mr.Jagtiani, contains a clause for liquidated damages and the time-lines set out therein for completion of the project is 30 months and it is ultimately provided therein that in case of conflict, the Escrow Agreement shall prevail.
18. As per the Escrow Agreement, the rent becomes payable immediately on vacating of the flats by the Applicants and unlike the Development Agreement where unless and until the PAAA is executed, the rent do not become payable, hence, as soon as the Applicants vacated in the year 2016, the rent payable to them become due is the submission of Mr.Jagtiani and, therefore, he would press for the entitlement of rent since 2016 and as far as the Covid period is concerned, the stand projected, is an eye wash, as no other member was denied the benefit of rent during the Covid period and, therefore, there is no reason why the Applicants shall be deprived of the same, is his contention.
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19. Mr.Purohit representing the Developer, has taken out Interim Application (L) No.494 of 2023, which is filed on 06/01/2023 and this Interim Application seeks rescinding the Escrow Agreements dated 29/05/2023 (Exhs.A and B), except to the extent of providing each of the Plaintiffs 958.50 sq.ft. of the total constructed area contemplated therein.
In support of the said Application, Mr.Purohit would submit that the Suit was filed for specific performance of the Agreements, inter alia, sale of constructed area by the Developer and it was disposed off by order dated 4/5, May 2016 passed in terms of the Consent Terms dated 04/05/2016, but the Plaintiffs, within the period allowed by the Consent Terms never paid the purchase price of the constructed area and, hence, it is a fit case, where Section 28 of the Specific Relief Act, 1963 deserve invocation.
By relying upon various clauses in the Development Agreement as well as in the Escrow Agreement, Mr.Purohit has urged that in terms of Clause 6 of the Escrow Agreement, the Plaintiffs were liable to pay purchase consideration to Defendant No.1 in installments for construction of new flats, each installment being tied to achieve a specific milestone of the construction and despite substantial progress in the new building and several construction milestones having been reached, the Applicants did not pay the agreed installment of purchase consideration, which constrained the Defendant No.1/Developer to call upon the Plaintiffs to pay a agreed sum of Rs.93,18,750/-, as the construction of 10th slab has been completed and they were also reminded of fixing a mutual convenient date to execute the PAAAs. According to M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 18/45 10 IAL-36585-22.odt Mr.Purohit, several reminders were forwarded to the Plaintiffs to ensure payments in terms of the Escrow Agreement and it is only on 19/11/2020, the Plaintiffs expressed their readiness and willingness to pay the cost price, however, they demanded the additional constructed area of 375.59 sq.ft.
20. As per Mr.Purohit, somewhere in the month of May/June, 2022, the construction of the new building was completed and on 16/06/2022, the MCGM issued Occupation Certificate and the Plaintiffs were informed about this milestone and possession was offered to the members of the society.
At this stage, as per Clause 6 of the Escrow Agreement, amount of Rs.75,50,000/- was due from each Applicant on or from 17/06/2022, however, they neglected to pay the same and, therefore, according to Mr.Purohit, they are not entitled to additional constructed area, and their entitlement is only be restricted to their rehab component.
Mr.Purohit has placed on record a chart, which also find part of his Interim Application, indicating the liability of the Applicants to pay the following installments within the stipulated time-lines and the chart reads to the following effect:-
Sr. Construction Instalment Date when Payment No. milestone (Rs.) milestone status achieved Token amount 2,50,000/- (Cheque Not paid received but not deposited M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 19/45 10 IAL-36585-22.odt at the request of the Plaintiffs)
(i) Within 10 days once 5,50,000/- 04.11.2018 Not paid IOD received
(ii) Once podium and 7,50,000/- 28.03.2021/ Not paid basement completed 22.05.2021
(iii) Once plinth work is 7,50,000/- 04.02.2019 Not paid completed
(iv) Slab wise payment 37,75,000/- 24.08.2021 Not paid
(v) During the time of 7,50,000/- 17.06.2022 Not paid possession (the Plaintiffs could have taken possession of their respective flats by complying with the Consent Decree)
(vi) Once OC received 7,50,000/- 16.06.2022 Not paid
21. By relying upon Clause 7 of the Escrow Agreement, Mr.Purohit would submit that the Developer is obliged to abide by the Development Agreement under which, each Applicant is entitled for allotment of one flat admeasuring 958.50 sq.ft. free of cost in lieu of their erstwhile flat and the Developer is willing to provide the same, subject to rights and remedies to recover damages from the Plaintiffs for the losses suffered by it, due to the obstacle and impediment created by them in completion of the project.
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Since the Plaintiffs, according to Mr.Purohit, have failed and neglected to pay the purchase price of the sale component in its entirety on or before 16/06/2022, he seek rescinding of the Escrow Agreements, by limiting it to the salable component, though Mr.Purohit do not dispute the entitlement of the each of the Plaintiffs/Applicants to the rehab component free of cost.
22. What therefore lies before me is consideration of the diagonally opposite reliefs, the relief prayed by the Applicants in Interim Application (L) No.36585 of 2022 filed in the Execution Application, seeking appointment of the Court Receiver, High Court, Bombay for taking physical possession of the flats to be handed over to them alongwith car parking spaces, so as to complete its balance work in accordance with the Development Agreement and the Escrow Agreements and hand over the possession of the same to the Applicants and for deposit of the amount of rent receivable till date of filing of the Exeution Application to the tune of Rs.30,90,312.5 qua each Applicant. On the other hand Interim Application (L) No.494 of 2024 seek rescinding of the Escrow Agreement except to the extent of the entitlement of the Plaintiffs/Applicants for the rehab component i.e. an area of 958.50 sq.ft.
In order to deal with the counter argument of Mr.Purohit, it is necessary to consider as to what in what circumstances a contract can be permitted to be rescinded on the ground of failure to pay the money as per the decree.
M.M.Salgaonkar
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23. Before going to the facts of this case, I shall turn my attention to the position of law that has been unfolded before me.
Section 28 of the Specific Relief Act reads to the following effect :-
28. Rescission in certain circumstances of contracts for the sale or lease of immovable property, the specific performance of which has been decreed.-
(1) Where in any suit a decree for specific performance of a contract for the sale or lease of immovable property has been made and the purchaser or lessee does not, within the period allowed by the decree or such further period as the court may allow, pay the purchase money or other sum which the court has ordered him to pay, the vendor or lessor may apply in the same suit in which the decree is made, to have the contract rescinded and on such application the court may, by order, rescind the contract either so far as regards the party in default or altogether, as the justice of the case may require.
(2) Where a contract is rescinded under sub-section (1), the court-
(a) shall direct the purchaser or the lessee, if he has obtained possession of the property under the contract, to restore such possession to the vendor or lessor, and
(b) may direct payment to the vendor or lessor of all the rents and profits which have accrued in respect of the property from the date on which possession was so obtained by the purchaser or lessee until restoration of possession to the vendor or lessor, and if the justice of the case so requires, the refund of any sum paid by the vendee or lessee as earnest money or deposit in connection with the contract.
(3) If the purchaser or lessee pays the purchase money or other sum which he is ordered to pay under the decree within the period referred to in sub-section (1), the court may, on application made in the same suit, award the purchaser or lessee such further relief as he may be entitled to, including in appropriate cases all or any of the following reliefs, namely:-
(a) the execution of a proper conveyance or lease by the vendor or lessor;
(b) the delivery of possession, or partition and separate possession, of the property on the execution of such conveyance or lease.
M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 22/45 10 IAL-36585-22.odt (4) No separate suit in respect of any relief which may be claimed under this section shall lie at the instance of a vendor, purchaser, lessor or lessee, as the case may be.
(5) The costs of any proceedings under this section shall be in the discretion of the court."
24. Mr.Purohit has relied upon the decision of the Apex Court in the case of V.S.Palanichamy Chettiar Firm Vs. C. Alagappan & Anr.1, which has pronounced upon the two provisions of the Specific Relief Act, being Sections 28 and 16 and on the point where there is a delay in making an application under Section 28, it is held as under :-
"16. In view of the decision of this Court in Ramankutty Guptan case when the trial court and the executing court are the same, the executing court can entertain the application for extension of time though the application is to be treated as one filed in the main suit. On the same analogy, the vendor judgment-debtor can also seek rescission of the contract of sale or take up this plea in defence to bar the execution of the decree. One of the grounds on which the trial court dismissed the execution application was that the decree-holder did not pay the balance of consideration as per the sale agreement and also did not pay within the time stipulated by the Court in the decree. The High Court could have certainly gone into this question when applications for extension of time were filed before it. However, on the objection by the judgment-debtor, it chose to send back the matter to the executing court for decision on these applications, which was perhaps, in the circumstances, not the correct procedure to adopt. But then, at the same time, the High Court put shackles on the discretion of the executing court by observing that the vendor might have felt that after the appeal filed by the vendor judgment-holder against the decree for specific performance was disposed of, they can even then deposit the amount at the time of seeking the execution of the said deed.
17. The agreement of sale was entered into as far back on 16- 2-1980, about 19 years ago. No explanation is forthcoming as to why the balance amount of consideration could not be deposited within the time granted by the Court and why no application was made under Section 28 of the Act seeking extension of time of this period. Under Article 54 of the Limitation Act, 3 years' period is prescribed for filing the suit for specific performance of a contract of sale form the date of the agreement or when the cause of action arises. Merely because a suit is filed within the prescribed period of limitation does not absolve the vendee-plaintiff from showing as to 1 (1999) 4 SCC 702 M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 23/45 10 IAL-36585-22.odt whether he was ready and willing to perform his part of the agreement and if there was non-performance, was that on account of any obstacle put by the vendor or otherwise. Provisions to grant specific performance of an agreement are quite stringent. Equitable considerations come into play. The court has to see all the attendant circumstances including if the vendee has conducted himself in a reasonable manner under the contract of sale. That being the position of law for filing the suit for specific performance, can the court, as a matter of course, allow extension of time for making payment of balance amount of consideration in terms of a decree after 5 years of passing of the decree by the trial court and 3 years of its confirmation by the appellate court? It is not the case of the respondent decree-holders that on account of any fault on the part of the vendor judgment-debtor, the amount could not be deposited as per the decree. That being the position, if now time is granted, that would be going beyond the period of limitation prescribed for filing of suit for specific performance of the agreement though this provision may not be strictly applicable. It is nevertheless an important circumstance to be considered by the Court. That apart, no explanation whatsoever is coming from the respondent decree-holders as to why they did not pay the balance amount of consideration as per the decree except what the High Court itself thought fit to comment which is certainly not borne out from the record. Equity demands that discretion be not exercised in favour of the respondent decree-holders and no extension of time be granted to them to comply with the decree."
25. Mr.Purohit has also relied upon the decision in the case of Prem Jeevan Vs. K.S.Venkata Raman & Anr. 2, which has held that upon the default of decree-holder purchaser to pay decreetal amount within time stipulated in the decree, would result in rescission of contract unless decree-holder seeks extension of time and the same is granted, but there cannot be automatic extension of time.
Dealing with the peculiar facts where the decree-holder fail to make the deposit in terms of the decree within the stipulated time and also did not seek extension nor was the extension granted and when no explanation was offered for delay in making the deposit, in absence of any such steps being taken, it was held as under :-
2 (2017) 11 SCC 57 M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 24/45 10 IAL-36585-22.odt "12. There is no doubt about the above provision permits the judgment-debtor to seek rescission of a contract and also permits extension of time by the court but merely because rescission of contract is not sought by judgment-debtor, does not automatically result in extension of time."
In Pankoj Kumar Bhattacharjee Vs.Manmatha Nath Vidyabhushan Bhattacharjee3, the Division bench of Calcutta High Court has observed as under :-
"3. .....In our opinion, it was not open to the appellant to come at any stage and at any time to pay the money and ask for enforcement of the decree for specific performance of the contract. It may be that even after fixing the time limit, the court had power to enlarge such time, but, that again would depend upon the attitude that might be taken by the party in whose favour such decree for specific performance is passed. In this case, even after the application was made by the respondent showing that under the terms of the decree for specific performance there was rescission of the decree for non-payment of the purchase money within the time limit fixed by the court, the appellant did not make any application at any stage either at the Trial Court or even at the first Appellate Court for enlargement of time to enable him to deposit the balance of purchase money. That being the position, we are clearly of opinion that in this case the order rescinding the contract and decree for specific performance based thereon has been rightly made."
26. Mr.Jagtinani has placed reliance upon a comparatively latest decision in the case of Surinder Pal Soni Vs. Sohal Lal (Dead) through Legal Representatives4, where the applicability of Section 28 has been gone into great details and the matters to be considered by a Court, while consideration of this provision is specifically carved out.
Upon considering the rival contentions in the factual background where the trial Court decreed the Suit for specific performance on 20/03/2012 and envisaged the performance of the Agreement to Sell dated 08/12/2003, the judgment debtor 3 1973 CC OnLine Cal 79 4 (2020) 15 SCC 771 M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 25/45 10 IAL-36585-22.odt was directed to execute the Sale Deed in respect of the remaining portion of the suit land, except two kanals within a period of two months, on receipt of balance consideration and upon deducting the consideration of two kanals land. The decision of the trial Court was appealed by the decree-holder and the judgment-debtor. The Appellate Court issued notice on the Appeal and the Application was stayed while the decree- holder moved for execution of the decree.
The judgment-debtor filed objection to the execution and the Appellate Court dismissed both set of Appeals by confirming the judgment of the Appellate Court, it was held that there was merger of the judgment of the trial Court within the decision render in the Appeal and by referring to the decision in the case of V.S.Palanichamy Chettiar Firm (supra), it was held that equities will have to be balanced and the Court considering the Application under Section 28, shall look into the attending circumstances, including the conduct of the parties and the equities arising out of decree in a suit for specific performance must accordingly be given weightage.
The factual position emerging before me will therefore have to be weighed and it will have to be ascertained as to it favours whom and I must undertake the exercise in the backdrop of the peculiar facts.
27. The Applicants being the owners of Flat Nos.10 and 9 respectively, each admeasuirng 725 sq.ft. area in the building 'White Rose' is not in dispute. Development Agreement dated 11/03/2013 executed between the society and the Developer M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 26/45 10 IAL-36585-22.odt agreed to redevelop the building, comprising of flats ranging between 700 sq.ft. to 720 sq.ft. carpet area, but in the re- developed building each flat was to comprise of 958.5 sq.ft. area. In Clause 14 of the Development Agreement, the Developer agreed to pay rent computed at Rs.105/- per month per sq.ft. of existing carpet area for the period of redevelopment, as a compensation for obtaining temporary alternate accommodation from the date of the individual handing over vacant and peaceful possession of such flat to the Developer. Clause 20 of the Development Agreement clarify that the obligation of the Society and the members to hand over the vacant and peaceful possession of their flats will accrue only after the Developer has submitted the certified true copy of IOD issued by MCGM alongwith the approved/sanctioned plans of the new building to be constructed on the society plot and execution of the individual agreements with the members. The time schedule for commencing and completion of the development was provided in Clause 27 of the Development Agreement, by setting our that the Developer shall apply and obtain IOD within six months from the date of execution and shall commence and complete the entire project within 30 months from the date on which the Society puts the Developer in vacant and peaceful possession of the site after all its members having vacated their respective Flat premises.
28. The separate agreement in form of an Escrow Agreement was entered with the two Applicants, the members of the Society, in possession of Flat Nos.9 and 10 respectively and M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 27/45 10 IAL-36585-22.odt Mr.Rattan Mukhi, in the Extra Ordinary General Body Meeting dated 01/08/2005 and the meeting further held on 12/05/2005 was permitted to independently negotiate with the Developer in respect of the flat in lieu of the flat occupied by him in the existing building, car parking space and other entitlements in the new building, which the Developer agreed to provide to him in lieu of he handing over the same to the Developer for redevelopment and to enter into separate Agreement/Writing recording the terms therein.
29. In the wake of the settlement arrived between Rattan Mukhi, the husband of Respondent No.2, a separate agreement is recorded and this contain various representation on part of the Developer as well as the member and a separate clause for consent and confirmation and permanent alternate accommodation. The relevant clause in form of Clause 6.1 recorded the consent of the member/occupant for developing the property by the Developer, who agreed to provide total 1800 sq.ft. carpet area inclusive of Fungible FSI area in the form of constructed self-contained flat premises comprising of the following :
"The parties hereto agree that the abovementioned area of 1800 sq.ft. (carpet) shall be with the certification of an Architect of the Member's choice. The Developer shall provide to the Member, on ownership basis, one flat admeasuring 1800 sq.ft. equivalent to 167.22 sq. mts. carpet area, or thereabouts ( which shall be exclusive of dry balcony flower bed and servants toilet and any other areas available free of FSI) on the 15 th habitable level subject to IOD of the new Building along with the amenities at or for the lump sum of Rs.75,50,000/- (Seventy Five Lakhs and Fifty Thousand Only) which is inclusive of construction cost and BMC premium."
M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 28/45 10 IAL-36585-22.odt The clause further contemplated the manner in which the member shall pay the aforesaid amount.
"(i) Rs.2,50,000/- (Rupees Two Lakhs Fifty Thousand Only) simultaneously against execution of these presents;
(ii) Rs.5,50,000/- (Rupees Five Lakhs and Fifty Thousand Only) shall be paid within a period of 10 days from the Developer obtaining the IOD in respect of the new building;
(iii) Rs.7,50,000/- (Rupees Seven Lakhs Fifty Thousand only) within a period of 10 days of the date on which the construction of the Basement/podium is completed;
(iv) Rs.7,50,000/- (Rupees Seven Lakhs and Fifty Thousand only) on obtainment of the Plinth CC and commencement of the Plinth work of the new building;
(v) Rs.37,75,000/- (Rupees Thirty Seven Lakh and Seventy Five Thousand only) shall be paid slab wise;
(vi) 10% Rs.7,50,000/- (Rupees Seven Lakhs and Fifty Thousand only) consideration shall be paid against the Developer handing over to the Member quiet, vacant and peaceful possession of the permanent alternate accommodation including the additional area;
(vii) Balance 10% being Rs.7,50,000/- (Rupees Seven Lakhs and Fifty Thousand only) shall be paid against the Developer obtaining the Occupation Certificate in respect of the new building."
30. Escrow Agreement separately executed with the Applicants also has a time frame provided, and the Developer unless prevented force majeure circumstances or reasons beyond its control, undertake the construction of the building within a period of 30 months from the Developer obtaining from all members of the Society, including the members handing over vacant and peaceful possession of their respective premises to the Developer. Clause 7.2 cast an obligation upon the Developer to make payment of liquidated damages to the extent of Rs.25,000/-, if the Developer fails/neglects to complete the construction of the said new building within 30 months. Clause 11.2 of the said Agreement is of great relevance and I must reproduce the same.
M.M.Salgaonkar
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"11.2 The Developer shall pay to the Member a sum of
Rs.125/- (Rupees One Hundred and Twenty Five Only) per square foot of carpet area of the said Flat per month aggregating to Rs.90,625/- (Rupees Ninety Thousand and Six Hundred and Twenty Five only) per month as and by way of rental compensation for procuring temporary alternate accommodation for a period of the first 24 months of the period of redevelopment of the said property commencing from the date on which the Developer obtains quiet, vacant and peaceful possession of the said Flats from the Member. The Developer shall handover post-dated cheques for the rental compensation for the period of twenty four months, 30 days prior to the member handing over quiet, vacant and peaceful possession of the said Flat to the Developer. After 24 th month the displacement compensation shall be paid by issuing further Cheques for six months with a 10% (Ten percent) increase in the amount referred will be handed over before completion of the 24 th month.
11.3 In the event the completion of the work of construction is delayed beyond the period of 30 months, then the Developer shall continue to pay rental compensation with the increments as per the then prevailing market rate and the Developer shall continue to pay to the Member such increased monthly rental compensation till such time that the Developer hands over to the Member possession of the said new flat in the newly constructed building alongwith Occupation Certificate. The said increased amount shall be paid by postdated cheques in tranches of six months each, which shall be handed over by the Developer to the Member in advance, prior to the commencement for the 6 months period to which they relate. 11.4 In addition to the above, the Developer shall pay to the Member, in advance, 30 days prior to the Member handing over quiet, vacant and peaceful possession of the said Flat to the Developer, brokerage charges equivalent to the sum of 2 months' Rs.1,81,250/- (Rupees One Lakh Eighty One Thousand Two Hundred and Fifty Only) rent and relocation charges of Rs.40,000/- (Rupees Forty Thousand only)."
31. Escrow Agreement thus made the Applicants entitled to a flat of 1800 sq.ft. on the 15th and 16th habitable floors and this area of 1800 sq.ft. would comprise of rehab component and the purchase area i.e. the salable component. Pertinent to note that the two areas having been merged into a flat admeasuring 1800 sq.ft. equivalent to 167.22 sq.mtrs.carpet area on two distinct floors, which was purchased at a lumpsum of Rs.75,50,000/-, which price was to be borne by the members, which included M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 30/45 10 IAL-36585-22.odt the cost of construction, BMC premium etc., and the sum to be paid in tranches, which were specifically set out in Clause 6.1(1) of the Escrow Agreement.
What is important to note is the obligation of the Developer to pay to the members, the rental compensation for procuring alternate accommodation for the first 24 months of the period of redevelopment of the said property commencing from the date on which the Developer obtains quiet, vacant and peaceful possession of the said flats from the Mukhis and it was mandatory for the Developer to hand over the post-dated cheques for the rental compensation thirty days prior to the member handing over the quiet, vacant and peaceful possession.
The dispute arose between the parties at this stage, as it is the case of the Applicants that they handed over vacant and peaceful possession of their original flats on 08/10/2016 and from that date, it was an obligation of the Developer to abide by Clause 11.2. The dispute further arose when the Developer sought to change the allotted floors to 11 and 12 the floor in light of height restriction, in the meantime, however, the dispute occurred between the Developer and the Society and the Development Agreement itself was terminated and, hence, there was no question of the Escrow Agreement in force, or any payment under it becoming due and arbitration was invoked by the Developer and as an arrangement, the Applicants agreed to accept the flats on the lower floors. The dispute between the Developer and the Society got resolved by executing the Consent terms and the termination was withdrawn, resulting in reviving of the Escrow Agreement.
M.M.Salgaonkar
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What is relevant to note is after this event of recalling of the termination of the Developer by the Society and it agreeing to obtain IOD within 90 days and to execute the PAAA, the members were handed over post-dated cheques towards the rent of 24 months, but for the Applicants, who had vacated their flats in the year 2016. The Applicants filed contempt petition against Respondent No.1 and its Directors and simultaneously when the work of the new building took off, the payments towards its construction in various tranches set out in the Escrow Agreement, on reaching the milestone become due and payable and admittedly it was not paid.
32. In the wake of the Consent Terms executed amongst the Applicants and the Developer, wherein the Applicants undertook to vacate their flats within 30 days of the receipt of intimation for payment of premium for Fungible FSI, the Respondent- Developer agreed to comply with the terms of Development Agreement and also the Escrow Agreement and on 4/05/2016, the Suit was disposed of.
The Applicants were entitled for two flats i.e. 1147 sq.ft. Carpet area on 15th floor, and 1311 sq.ft. Carpet area on 14 th floor, i.e. total admeasuring 3600 sq. ft., in terms of the Escrow Agreement read with the Development Agreement.
It is to be noted that the terms of the Escrow Agreement became part of the decree and it became imperative for the Developer to pay the rent, brokerage charges, corpus etc. in lieu of the Applicants handing over the quiet and peaceful possession of their premises for the purposes of redevelopment and it is not in dispute that the Applicants M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 32/45 10 IAL-36585-22.odt handed over the vacant possession of both their flats on 8/10/2016, and it is from this date, they were entitled for payment of rent, as the Developer was not liable to make arrangement for transit accommodation, but was liable to pay the rent aggregating Rs.90,625/- per month by way of rental compensation for period of first 24 months of the redevelopment and it was duty bound, to handover post dated cheques 30 days prior to the Applicants, on handing over the vacant possession of their flats. The Escrow Agreement specifically provided that after 24 months, the displacement compensation shall be paid by issuing further cheques for six months with a 10% hike in the amount.. In addition, the Escrow Agreement also cast an obligation upon the Developer to pay brokerage charges equivalent to a sum of rupees, of two months that is Rs. 1,81,250/- and relocation charges of Rs. 40,000/-.
In addition, the Escrow also contemplated completion of the project within the timeline specified and therefore, when the Escrow Agreement and Development Agreement became part of the Decree and it bound the Developer as well as its successor.
33. Under the Escrow Agreement, the Developer was entitled to receive the amount towards the area measuring 821.5 sq.ft. carpet which was purchased by the Applicants and the tranches in which the payment was to be received, was specifically set out.
There is no doubt that the Applicants have not paid a single penny towards the purchase consideration, however, the M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 33/45 10 IAL-36585-22.odt learned senior counsel Mr.Jagtiani has placed on record a series of communication, offering a justification for the same.
Along with the affidavit-in-reply, a written reply filed to the Application by the Developer, and a heap of correspondence is placed on record, which include various communication addressed to the Mukhis, repeatedly asking them to clear the payment in the wake of the projected milestones having being achieved.
By communication dated 20/08/2020, the Developer drawing benefit of the Covid pandemic and by invoking the force majeure communicated, that it will not be able to pay the rent commencing from 24/03/2020, till such period the lockdown is lifted, and even soought extension of the timelines, for completion of the project. Yet in the very next communication dated 24/05/2020, the Applicants were reminded of their obligation to pay the consideration of Rs. 75,00,000/- and by relying upon Clause 6 of the Escrow Agreement, it was indicated that an amount of Rs. 46,59,375/- was due and payable, under the two Escrow Agreements, that is aggregating to Rs.93,18,750/-.
Mr.Jagtiani has expressed a doubt over the projected milestones reached, as according to him a few days ago that is on 24th May, a communication was addressed expressing, helplessness in the wake of Covid and immediately in the month of May 2020, it is indicated that the milestone of 10 th slab is attained and the amount was demanded.
Repeated communications are forwarded to the Applicants claiming the amount under the Escrow towards the purchase consideration of the purchase area, in addition to the M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 34/45 10 IAL-36585-22.odt rehab component. In a detailed communication dated 12/11/2020, the Respondent, Developer attributed, hurdle and obstacle in the redevelopment at the end of the Applicants and justified withholding of the displacement compensation amongst other benefits, for two reasons; the first being non signing of the PAAA and secondly, the difficulties, hurdles and obstacles created by them in the redevelopment.
34. It is surprising to note that the Applicants, who have handed over vacant position of two flats in their possession as early as 2016 are being blamed for creating an obstacle in the process of redevelopment. Blame is put upon the applicants for not signing the PAAA and not clearing the amount due towards the purchase consideration of the area mentioned in the Escrow, despite repeated demands, and once again, they were called upon to make the payment of Rs.1,07,34,375/- and avail their entitlement and get the PAAA executed by paying the necessary stamp duty on rehab portion.
35. The series of communications met with an email addressed by the Applicants on 19/11/2020, to the successor of the Respondent No.1 i.e. M/s I.R. Developers, seeking clarification and confirmation of their carpet area as per the Development Agreement and the Consent Terms dated 4/05/2016. By referring to the increase in the FSI available to White Rose CHS redevelopment, which had been increased to 3.24 (with the old FSI being 2.75), a clarification was sought on the area of entitlement by expressing that the Applicants are ready and willing to pay the purchase/cost price.
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Mr Jagtiani has asserted that if the Applicants had received clarity on this aspect, the present situation would not have arisen as for no reason, the Developer justified withholding of the benefits due and payable to them on the ground that the purchase consideration was not paid. It is the contention of the Applicants that the Developer preferred not to invoke section 28 of the Specific Relief Act, which relief is sought only after the Applicants have filed the present Execution Application and this belated approach on part of the Developer is frowned upon, by alleging that it is an afterthought to evade the execution of the Decree. On the other hand, the Applicants have shown much accommodation to the Developer, as well as his successor by accepting the lower floors as the Application filed subsequent to the height restriction being removed and being relaxed in the locality, was withdrawn.
Even today, Mr Jagtiani has instructions to make a statement that, instead of the area of 375 sq.ft., which is the entitlement of the Applicants, as against each of the flat, they are ready to accept Rs.28 Lakhs in cash in lieu of the additional FSI component, which is made available subsequent to the new DCPR 2034 coming into force.
36. The Respondent-Developer has adopted a stand that since there was failure on part of the Applicants to execute the PAAA, they were denied the benefits flowing from the Escrow that is the rent component etc. As per the Developer, the obligation to be discharged by the Applicants was stage-wise, but till date, not a single farthing is received towards the sale M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 36/45 10 IAL-36585-22.odt consideration for the area, that has been purchased by the Applicants for an agreed consideration, in any case the stand of the respondent is that the Applicants are entitled for rent only as the rehab component.
Another submission advanced on behalf of the Respondents is the time till which the rent is payable as a stand taken by Mr.Purohit is, that upon the Occupation Certificate having been obtained in 2022, the other members of the Society were asked to take possession of the respective units on 17/06/2022. When specifically asked as to whether there is any communication exchanged with the Applicants asking them to take posession of the flats, Mr.Purohit is unable to pinpoint towards any such document and this is for the obvious reason that the flat to be offered to the Applicants is a composition of the rehab component and the saleable component and this difficulty, even the Developer is confronted with.
At this stage, it is very difficult to segregate these two components, and therefore, it must go hand-in-hand. With a specific stand adopted by the Applicant, as indicated in their communication that he is ready to pay the entire consideration, I do not see any failure to discharge the obligation, cast on the Applicants in paying the purchase consideration, for purchase of the additional area. One thing is certain that the Developer did not pay the rent to the Applicants despite, receiving the vacant possession of the flats in their possession for the purpose of redevelopment, and this was on the specious pretext, that the sale consideration towards the additional purchase area as agreed in the Escrow M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 37/45 10 IAL-36585-22.odt Agreement was not paid, despite the designated milestones were attained.
37. Today, what the Applicants are seeking is execution of a Decree, in their favour, where the Defendant/Respondent No.1 is liable to abide by the terms of the Development Agreement as well as the Escrow Agreement. It equally binds the Applicants who are, liable to make the payment of the consideration for purchase of the area as set out in the arrangement.
As on date, there is Execution Application filed, with an interim application seeking appointment of a Court Receiver for completion of the flats falling to the share of the Applicants in the new building, and the pictures produced before me by Mr.Jagtiani are clearly reflective of the fact that the two units which has come to the share of the Applicants are still incomplete, despite the other members of the society being put in possession of their respective flats, which were handed over to the Developer for the purposes of redevelopment.
38. At this stage, comes an application under Section 28 of the Specific Relief Act, claiming rescinding of the Escrow Agreement with the claim that the performance did not come at the end of the Applicants, and since the time is not extended, the Agreement deserve to be rescinded.
The Applicants have filed the Execution Application on 02/11/2022 and the Interim Application for appointment of Court Receiver to complete the balance work in Flat Nos.1402 and 1502, which come to the share of Mukhis is also filed on M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 38/45 10 IAL-36585-22.odt 24/11/2022. The Application filed by the Respondent No.1 under Section 28 of the Specific Relief Act is filed on 06/01/2023, and worth it to note that despite addressing repeated communications, calling upon the Applicants to make the necessary payments as per the tranches, set out in the group in terms of the decree passed on 04/05/2016, when the parties undertake to bound by the Development Agreement and a agreement, at a belated stage, the Application for rescinding, the Escrow Agreement comes at the end of the Developer. Mr.Purohit claims this as a way of matter of right, as according to him, the Applicants never sought extension of time to abide by their obligation under the Consent Terms, and, therefore, it is his submission that the Escrow Agreements stand rescinded, as except for the token amount of Rs.2,50,000/- in form of a cheque issued on 29/05/2013, which even was not deposited, no further payments came from the Applicants at the distinct tranches, and since the Occupation Certificate was received on 16/06/2022, the payment should have come in its entirety, but it has not come, and this is indication of non-compliance of its obligation within the time-lines, set out in the Consent Decree.
Reliance upon the decision in the case of V.S.Palanichamy Chettiar Firm (supra),which has highlighted upon the power of the court passing the Decree and on careful examination of the legal scenario, it becomes evident that the power to rescind a contract(specific performance of which has been decreed) is a discretionary power, which permit the Court to extend the time for payment of balance price, even though it had earlier directed in the Decree that the payment M.M.Salgaonkar ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 39/45 10 IAL-36585-22.odt is to be made by certain date, and on failure, the suit shall stand dismissed. The legal position that emerges from the insightful reading of the authoritative pronouncement, would lead me to a conclusion that the decree for specific performance has been described as a preliminary decree and the power under Section 28 of the Specific Relief Act is discretionary and the Court shall not ordinarily annul the decree once passed by it and the Court does not seize to have the power to extend the time, even though it was earlier directed that the payment of balance price or discharge of obligation shall be limited by the time-lines set out. As exercise of power under Section 28, will be dependent on the attending circumstances and the conduct of the parties shall also be a relevant consideration which shall weigh with the Court.
Reliance placed upon the decision in the case of V.S.Palanichamy Chettiar Firm (supra) is distinguishable on the facts where the agreement for sale was entered into as back as 19 years ago and no explanation was forthcoming as to why the balance of consideration could not be deposited within the time granted and why no application was made under Section 28, seeking extension of the time. It is in these facts it was held that if now time is granted to deposit the amount, it would be going beyond the period of limitation prescribed for filing the Suit for specific performance of the agreement, though this provision may not be strictly applicable. The court refused to exercise the discretion in favour of such a respondent as equity would not have favoured him.
M.M.Salgaonkar
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The Application filed under Section 28 of the Specific Relief Act at a belated stage and as an afterthought definitely do not warrant any consideration. The relief prayed being discretionary and the conduct of the Respondent-Developer in denying the Applicants of their benefits flowing under the Development Agreement and the Escrow Agreement, disentitle it for an equitable relief of rescinding the Escrow Agreement.
39. Mr.Jagtiani has placed before me the computation of rent amount receivable by the Applicants in different scenario; the renting payable till the date of filing of the Execution Application i.e. upto 02/11/2022, the rent receivable till date i.e. 01/04/2024, and in first case, the rent payable is ascertained as Rs.30,90,312.5, whereas in the second contingency the rent receivable from 01/04/2020 to 01/04/2024 at the rate of Rs.99,687.50 is calculated as Rs.47,85,000/-. In addition, the compensation receivable by the members from the Developer at Rs.28,00,000/- per flat is added to the figure and since, the issue as to whether the rent continue to remain payable till date or whether it shall stop being paid upon the Occupation Certificate having been obtained and the members were asked to take possession of the respective units is a matter, which I deemed it, to be determined in the Execution Application, as the parties are contesting on this point. Therefore, though the Interim Application by the Applicants have sought deposit of Rs.50,56,577/-, Mr.Jagtiani has reduced this amount to Rs.30,90,312.5, as due and payable to each Applicant, as on date, pending the hearing of Execution Application.
M.M.Salgaonkar
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40. Mr.Jagtiani has given the computation of the receivables, which he would state to be received from the Developer and its comparison against the liability of the Applicants to pay the purchase consideration of Rs.75,50,000/- each flat and by drawing the following computation, he would submit that the Applicants have to receive the payment from the Developer and his computation is in the following manner :-
Sr No. Particulars Amount Total Amount For Applicant No.1- Rattan Mukhi (Flat No.10) 1 Cl 11 of Escrow Rs. Rs. 47,85,000/-
Agreement Pg No.98 of 99,687.50/-
EXA: x 48
Rent Amount Receivable months
from: 1st April, 2020 to 1 st
April, 2024, i.e., 48
months
2 Cl 6 of Consent Terms Rs. Rs. 28,00,000/-
III, Pg. 529 of Reply filed 28,00,000/-
by the Applicants to IA
494 of 2024:
Compensation Receivable
from the Developer to all
members
Total Receivable from the Respondent No.1 Developer: Rs. 75,85,000/-
3 Cl 6.1(1) of Escrow Rs. Rs.75,50,000/-
Agreement, Pg No.93 of 75,50,000
EXA: Under the Escrow
Agreement, Applicant
was to pay Respondents
for extra area
Total Amount Receivable by the Applicant after necessary Rs. 35,000/- payments to Respondent No.1 Developer : (Rs.75,85,000 -
Rs.75,50,000)
M.M.Salgaonkar
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Sr No. Particulars Amount Total Amount
For Applicant No.2- Bhavisha Mukhi (Flat No.9) 1 Cl 11 of Escrow Rs. Rs. 47,85,000/-
Agreement Pg No.98 of 99,687.50/-
EXA: x 48
Rent Amount Receivable months
from: 1st April, 2020 to 1 st
April, 2024, i.e., 48
months
2 C1 6 of Consent Terms Rs. Rs. 28,00,000/-
III, Pg. 529 of Reply filed 28,00,000/-
by the Applicants to IA
494 of 2024:
Compensation Receivable
from the Developer to all
members
Total Receivable from the Respondent No.1 Developer: Rs. 75,85,000/-
3 Cl 6.1(1) of Escrow Rs. Rs.75,50,000/-
Agreement, Pg No.93 of 75,50,000
EXA: Under the Escrow
Agreement, Applicant
was to pay Respondents
for extra area
Total Amount Receivable by the Applicant after necessary Rs. 35,000/- payments to Respondent No.1 Developer : (Rs.75,85,000- Rs.75,50,000)
41. Since I deem it appropriate to keep the issue of the time upto which the Developer was liable to make the payment of rent open, to be determined at the time of Execution Application, by modifying the prayer clause (iii), I am inclined to grant the relief in the Interim Application.
42. Ultimately, at this stage, it is necessary to balance the equities and as far as the Applicants are concerned, it is a matter of having a shelter on their head, and hence, I deem it appropriate to secure the same, as their entitlement to the flats, as far as rehab component is concerned, is not disputed even by Mr.Purohit.
::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 :::43/45 10 IAL-36585-22.odt What is disputed and tried to be withheld by the Developer is the saleable component, as Mr.Purohit has vehemently submitted that not a single penny has come towards the same. However, since the saleable component and the rehab component are so intrinsically woven that it is difficult to segregate and what is reserved for each Applicant is a flat admeasuring 1800 sq.ft., which is left unfinished.
Therefore, it is necessary to appoint a Court Receiver to undertake its completion by appointing the Applicant No.1, as an agent of the Court Receiver.
Worth it to note that I offered Mr.Purohit that the Developer can complete the flat, so as to make it habitable, but the suggestion was met with resistance and in order to ensure a home for the Applicants, who are out of it since 2016, I deem it appropriate to appoint the Court Receiver, High Court, Bombay, who shall take possession of the flats allotted to the Applicants alongwith six car parking spaces and under the supervision of the Court Receiver, the Respondent No.1 is directed to complete the balance work in accordance with the Development Agreement as well as the Escrow Agreement on or before 31/10/2024 and, thereafter hand over the possession of the flats and the car parking spaces to the respective Applicants. The Application is, therefore, made absolute in terms of prayer clause (b).
43. However, as far as prayer clause (c) is concerned, I deem it appropriate to direct Respondent No.2 to furnish a bank guarantee or liquid security for an amount of Rs.30,90,312.5 as against each Applicant, which shall secure the rent ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 44/45 10 IAL-36585-22.odt receivable by the Applicants till the date of filing of the Execution Application. The bank guarantee or liquid security shall be furnished within a period of six weeks from the receipt of the order.
44. In addition, the Respondent No.1 shall file an affidavit and disclose on oath the details and particulars of its assets and properties within a period of six weeks, as it would be necessary at the time of hearing of the Execution Application.
45. The claim of the Respondents that the rent is not payable during Covid period as well as upon the Occupation Certificate having been obtained and possession having been offered to the Applicants, shall be considered as a defence in the Execution Application.
Since the Applicants by their communication dated 19/11/2020 had expressed their readiness and willingness to pay the cost price for the purchase area, provided some clarity was offered on the total carpet area to be allotted, and since, the chart reproduced above reflect that the amount due and receivable by the Applicants towards the displacement compensation and other components exceed the amount of Rs.75,50,000/-, this adjustment shall be considered at the time of hearing of the Execution Application.
46. For the reasons recorded above, Interim Application (L) No.36585 of 2022 filed by the Applicants is allowed in the aforestated terms, whereas Interim Application (L) No.494 of ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 ::: 45/45 10 IAL-36585-22.odt 2023 filed by M/s.Arth Housing Development Pvt. Ltd., under Section 28 of the Specific Relief Act, is dismissed.
( SMT. BHARATI DANGRE, J.) ::: Uploaded on - 16/05/2024 ::: Downloaded on - 25/05/2024 07:45:15 :::